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Tuesday, November 26, 2013

2 REITS have entered the Australian Market


AIMS AMP Capital Industrial REIT plans first Australian acquisition

Source: http://www.theasset.com/article/25629.html#axzz2lkKTuyag

Suntec REIT buys Sydney office tower for S$481 million



Australian's economic prospects

Australia's Treasury Secretary Martin Parkinson said it would be "prudent" to raise the legislated debt cap from 300 billion Australian dollars(US$282 billion) to A$500 billion, given a worsening economic outlook as the country grapples with the end of a decade long resources boom. But the Labor opposition, swept aside in September elections dominated by a slowing economy and rising unemployment, rejected the request, joining forces with the Greens party holding the balance of power in the upper house to block the move. They have offered to approve a A$400 billion cap on borrowing instead.

Source: http://www.nasdaq.com/article/australia-sees-grimmer-economic-outlook-amid-debt-row-20131120-00070#ixzz2lkPtQzXc

The increase in debt limit will means that inflation rates are set to soar in Australia while interest rates remain low which favored foreign investors, especially in the property sector whereby huge loans are required. The acquisition of Australian Property from Suntec and AIMS would also mean that they could be taking advantage of the low australian currency to make acquisitions which could profit or save the company money and these money could be used to pay the loan's interests.

When is a good time to buy?

I have no answer to my own question but i might be able to predict the period of dropping using graphs.

Let's look at 2 stocks that i might want to buy and based on a 5 year average determine the period to purchase the stock.

Color code indications:
Red - Aug-Sep
Black - Feb-Mar


HK Land


Source: Bloomberg


SATS
Source: Bloomberg


However, it does not always happen for all the stocks. It just happened that these 2 stocks show slight similarity in their drop periods.

Both stocks showed that their major drop in share prices happened between August to September.
It would be good now to wait till February to see if the tapering announcement in January really kicks in or will the Fed continue on their monthly bond purchases and keeping interest rates low.

Wednesday, November 20, 2013

China's hidden debt problem

China's shipping dragon rests where the Yangtze River flow towards the sea north of Shanghai, which was previously the rising nation's biggest private ship builder became quieter on a recent morning whereby China Rongsheng Heavy Industries Group Holdings Ltd's 38,000 employees went jobless as the the company struggled to stay afloat over the past 2 years. With 80% of the employees being sacked, the restaurants and shops serving them have since closed.

After accumulating $4.1 billion in debts, Rongsheng seeked a government bailout is a example of a company overly invested that have gone bust.

Source: http://www.businessweek.com/news/2013-11-18/credit-driven-china-glut-threatens-to-turn-into-bank-debt-crisis

Many of China's companies are facing these issues as the domestic consumption of the population remained low and bank funding to companies not being able to land in the correct place.

People of china sees property investment as the safest form and would save up to buy a property which have already inflated a bubble in the China's property market, therefore affecting domestic spending.

The company funds that were borrowed did not contribute effectively to the economy because of the lack of demand for products and services, but the CEOs and the directors were still being paid. These people became richer and those funds that they earned goes into other parts of the world while the company's financial position is in a bad state. This is one of a similar occurrence that happened during the Lehman Brother's financial crisis whereby bankers were so well paid that even if the company went burst, the employees benefited from it in the expense of the company.

The problem had been hidden by the China's government though, but when it became too big to be hidden, the financial world will take a huge plunge.




Saturday, November 16, 2013

Suntec REIT buying an office tower in Australia

News of Suntec REIT acquiring an prime office tower to be developed in Australia for A$413.2 million cause the share price to drop ~2% on last friday.

A further 1-5% may be expected to drop next monday as this stock as the debt ratio nears 40%.

Although this acquisition is expected to generate more returns for unit holders, in the short term, will affect the group's net income as acquisition costs will be funded by borrowings. Coupon payments will be issued to unit holders during the construction phase of the tower to mitigate lower DPU.

Source: http://www.channelnewsasia.com/news/business/singapore/suntec-reit-acquiring/888214.html



Sunday, November 10, 2013

Funds movement

Global fund movements might have caused the STI to be slightly weaker than it was suppose to be. Last friday, the Dow Jones  Industrial Average gained 1.08% while the STI dropped 0.78%.

More funds have been moved to the US in favor of the bond purchases by the Fed and  although investors are anxious about a taper in bond buying, they are still very positive about the US market. The continuous bull trend in the US might be causing a bubble that could burst anytime with a 5 year high Dow Jones, S&P 500 and NYSE. What goes up must go down.

If more investors get positive about the US markets, funds may be withdrawn from Asian markets as Asian stocks get more expensive.

Be on the lookout for some good deals in the STI if it continues to drop further.

Sunday, November 3, 2013

Semiconductor companies report better earnings

Hi-P

Report quarter profit increase of 5.2%
YTD profit increase of 771.1%

Serial System

Report quarter profit increase of 35%
YTD profit increase of 40%

Source: SGX

These 2 companies may not be a good indicator that the semiconductor market will continue to do well in the next 5-10 years but is able to show some indication of a positive pickup in the industry in a short term perspective.